THE Bank of Zambia(BoZ) says a stronger Kwacha will help offset the inflationary impact of a 26 percent rise in electricity prices which have been effected this month.
“The appreciation of the Kwacha has already started and that should help to moderate the impact of the higher power tariffs,” BoZ deputy governor Denny Kalyalya said last week.
Dr Kalyalya said Zambia can still achieve its target of 8.0 percent inflation by year-end despite higher power prices.
He said the Kwacha should strengthen due to rising metal prices and planned maize exports after a bumper harvest.
“The maize harvest is just being offloaded onto the market now so to (some) extent that will also moderate some of the pressure coming from the hike in electricity tariffs.”
Zambia allowed farmers and traders to export its maize surplus of 1.1 million tonnes mainly in southern Africa after it produced 2.7 million tonnes of maize in the 2009/2010 season.
Dr Kalyalya told Reuters after the Central Statistical Office released data showing Zambia’s inflation accelerated to 8.4 percent year-on-year in July compared with 7.8 percent in June.
The rise in inflation was largely due to price increases for non-food products such as clothing, household fuel and lighting, transport and communication.
“Of the total 8.4 percent annual inflation in July 2010, food products accounted for 2.0 percentage points and non-food products accounted for 6.4 percentage points,” said John Kalumbi, CSO acting director.
Despite the huge harvest of maize, Zambia’s staple food, and the anticipated appreciation of the Kwacha, some analysts said inflation was unlikely to come in on target this year.
[REUTERS]
Short-term thinking!!!! Ba Deputy Governor honestly, its sad such comments coming from you!!!
# What do you mean by short term, the governor just stated fact. Basic Economics clearly states that there is a correlation between curry strength and inflation. Most of the goods produced and consumed in Zambia have a huge import cost attached to them, so if the currency strengthens, the cost of these imports is bound to either go down or remain flat and that has a direct bearing on the cost of production which ultimately affect the cost goods and services are sold at. And this is what the Governor is trying to say. Of course a strong currency is bad for exporters.Could it hurt the country’s exports, maybe. Are exports crucial for our economy? You bet. That is why they call it economics. Very difficult act to balance, indeed.
The only way we can have a stronger kwacha quick is to allow Mining companies bank achunk of their billions of dollars copper sales proceed with the Bank of Zambia. The should only under supervison be allowed to apply for it’s withdrawal to use on capitla projects. Thats what south africa does. We should be seen to be sharing their super profits.
the kwacha has been stable dispite the world economic down trend. good economic policies by mmd
@ #2 MMD Chief Bootlicker
You have said it all. There is nothing more to add. 3 E’s are in charge.
Stop about being theoritical kalyalya. The people of this Country need practical solutions and not theoritical one’s as your reasoning will not help in the high tarrifs imposed on the Citizens by Zesco only to fund MMD. We need a complete shake-up starting from the Governement and bring in people who can relate reality with the figures put across them.
Unfortunately, the rise in electricity tarrifs will not bring down costs of production. Cheap imports into the country because of a strong Kwacha will have supply side shocks that will filter into the long term. As pointed out bumper harvests are short term cushions and should not be much of a fuss. To sustain long term stability in economic indicators let us renovate both demand and supply side structures such as renegotiation of mining agreements, ZESCO rebranding, better collective agreements for workers, social welfare for veneralble citizens etc.
BA SAKALA
don’t know what he’s on about? Kwacha has appreciated by 1% only compared to 12%-42% increase in power costs!!!!! when energy prices go up production costs go up and are all then passed on to the hapless consumer. flactuations in energy prices (fuel + electricity) affect each and every industry. unlike energy, only a fraction of our economy reacts to changes in currency rates.. besides.. we’ve seen in the past great strengthening of the kwacha vs $ but stagnation or if anything increase in Consumer good Prices..
the zambian economy does not obey any statistical laws. even the global recession did not mean a thing. whatever happens the majority wallow in poverty and there is no solution in sight.
This bank deputy governor is so dull. I dont know if he is an economist or a politician. Banking the performancy of Zambian economy on speculations. hey man…be profetional not what you are saying. What we want to hear from you is that now the chinese and indians will start paying mining tax and will also start banking their copper dollars in Zambia at least 6 months before it is taken out of Zambia. These are the only variables that will stablise the Kwacha and inflation. Really this Bank of Zambia governor is so dull.
Strengthening the Kwacha is not difficult to do. Tax the mines at $1.2 billion a year. Build up national reserves. Streamline government to prevent duplication of tasks; get serious about corruption in procurement, works and supplies, and road construction – this will eliminate waste and reduce the money required to run the government.
All these things will strengthen the Kwacha.
But most importantly, stop the neoliberal idiocy of trying to reduce inflation at all cost, including at the cost of indigenous economic growth.
MMD Chief A** licker(B.E.N. K.A.N.G.W.A) you a mr know it all.Be humble,dont try to look smart.are people going to eat theory.Kafupi came with all kinds of theory with his so called learned cabinet and look where it has left Zambia.People need jobs,good road,better health systems..not theory.